American Airlines, US Airways settle DOJ antitrust suit

[JURIST] The US Department of Justice (DOJ) [official website] on Tuesday announced a settlement [press release; remarks] of the antitrust lawsuit opposing the merger of American Airlines and US Airways [corporate websites]. The DOJ filed a proposed final judgment [text, PDF] in the US District Court for the District of Columbia [official website], which will allow the airlines to finalize the proposed deal. The proposed judgment concludes that:

Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 USC § 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States' responses to comments.
Among other things, the new airline will be required to have fewer flights out of Washington's Reagan Airport and New York's LaGuardia Airport, divesting many of their gates at these and other major airports. The competitive impact statement [text, PDF] details the changes required of the new airline, which will be called New American and will retain 57 percent of the nations flights.

US antitrust officials challenged the merger [JURIST report] in August after the Government Accountability Office [official website] released a report [text, PDF] in June warning that the new airline would be the only carrier providing nonstop service on seven of the 12 routes where they currently compete. The report also said that the merger would reduce competition on 1,665 other domestic routes and create new competition in just 210 routes. Talks of a merger began last year when US Airways began to pursue bankrupt American Airlines. The merger was seen as a natural fit in an aviation landscape that had evolved and dramatically consolidated since the industry was deregulated by Congress in 1978. In a hearing of the Senate Committee on Commerce, Science and Transportation Senator John Rockefeller IV [official website] noted that during that time "consolidation was a necessary evil—no industry sector could sustain year after year of multibillion-dollar losses." Roy Kienitz, who served as undersecretary for policy at the Department of Transportation argued that, "the airline industry spent much of the last decade going bankrupt. As a consequence, we had a period where people got to fly for a price below what it cost to provide the service. But this cannot last. Something has to give." Kienitz also noted that he is concerned the effort to block the merger is rooted in a effort to go back to a time when prices were lower—a situation which he concluded was "unsustainable."

 

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